Asia stocks fall after Spain gets downgrade

Asian stock markets fell Thursday after Spain, the fourth-largest euro economy, was slapped with a two-notch credit downgrade and the U.S. earnings season opened with a whimper.

Standard & Poor's downgraded Spain's debt late Wednesday from BBB+ to BBB-, the lowest investment-grade level. S&P said the action was due to the country's recession, high unemployment and social unrest, which limit the government's options for reversing the country's financial crisis.

Meanwhile, aluminum giant Alcoa marked the unofficial start to U.S. corporate earnings season by beating earnings estimates - but investors were disappointed that the company cut its demand forecast for the year, mostly due to a slowdown in China.

In another sign of a worsening global slowdown, South Korea's central bank cut its benchmark interest rate and lowered economic growth forecasts for this year and next.

Spain presented yet another deeply worrying problem. Last month, the European Central Bank agreed to buy unlimited amounts of the government bonds of struggling European countries like Spain to help lower their borrowing costs. But the governments first need to apply for a bailout.

Spain has not applied for a bailout. Instead, the government has introduced a series of austerity and labor measures in a bid to bring down its budget deficit and convince investors it can manage its finances without outside help.

"The slow progress towards a sovereign bailout for Spain will have likely played a role in the (S&P) decision, a factor that is also weighing on general market sentiment," analysts at Credit Agricole CIB in Hong Kong said in a market commentary. "The debt downgrade may on the margin increase the pressure on the Spanish government to request a formal bailout."

The U.S. quarterly earnings season is expected to be the weakest in three years. Analysts project that companies in the S&P 500 will collectively report third-quarter earnings that are 1 percent lower compared with the same quarter of last year.

Chevron, the second-largest U.S. oil company, has warned that slumping oil prices and production would cause earnings to be "substantially lower."

Benchmark crude for November delivery was up 26 cents to $91.50 per barrel in electronic trading on the New York Mercantile Exchange. The contract fell $1.14 to finish at $91.25 per barrel on the Nymex on Wednesday.

In currencies, the euro fell to $1.2848 from $1.2897 late Wednesday in New York. The dollar fell to 78.09 yen from 78.19 yen.